Charities Seek Strategy as Contributions Decline

In 1962, Americans with annual incomes of $1 million or more gave away nearly $1 of every $5 they earned. But 20 years later million-dollar-plus earners gave away only about $1 in $15.

Of course, a million dollars isn't what it used to be, either. And just as inflation has ravaged the dollar since 1962, so have the tax laws diminished incentives for the rich to give.

The merely affluent are giving less, too, the latest research shows. Those with incomes of between $50,000 and $500,000 annually gave a smaller share of their income to charity in 1983 than they did in 1977.

And a study for the Rockefeller Brothers Fund suggests that those model '80s people--the young, upwardly mobile urban professionals, or yuppies--are among the least generous of all Americans with many giving not one penny to charity.

Meanwhile, the poor and the middle class give more and more, IRS data show.

These and other trends about stinginess and generosity in America were explored the other day at a national charity conference held in the shadow of Wall Street.

Independent Sector, an organization of 300 major charities and 300 foundations and corporations, and the United Way Institute co-sponsored the third annual Spring Research Forum. This year's theme was "Giving and Volunteering: New Frontiers of Knowledge," but the 200 conferees focused on cutbacks in alms giving by those most able to give.

"The reduction in giving by the very well-to-do in our society is a matter of deep concern," observed Brian O'Connell, president of Independent Sector.

Rich Americans are the major source of donations to many private colleges, universities, museums and cultural organizations.

O'Connell and others say rich and affluent Americans are giving less for a variety of reasons, including less involvement in religious activities, where giving habits are instilled at an early age.

But researchers at the conference said the principal reason the rich are giving less is that the federal government has, in effect, been raising the cost of giving to charity by reducing tax rates, thus making charity less advantageous as a tax deduction.

"People respond to the tax price of giving, much as they do to the price of fruit," said Charles T. Clotfelter, a Duke University economist who has been studying the likely impact of tax simplification proposals on charitable giving. His studies show that lowering taxes will mean less giving, especially by those in the higher tax brackets.

No one at the conference spoke against the notion of lowering tax rates, but many advocates of nonprofits say that additional cuts in tax benefits for charitable giving will deal a serious blow to charities.

The full Treasury Department plan, with all its nuances, would result in about a 20% drop in charitable giving, half of that attributable to the lowering of tax rates, Clotfelter said.

Clotfelter said his econometric model, predicted giving by those making $100,000 or more per year would drop 15%, after adjusting for inflation, between 1980 and 1983 because of tax law changes. He said the actual decline was 14% and this suggests his model is reliable.

Who Will Suffer

He said museums, private colleges and other organizations that depend on gifts of appreciated property for as much as half of their donations will suffer most if the Treasury Department plan to reduce the value of such gifts for tax purposes is adopted. Clotfelter said if Congress limits deductions on appreciated property to the purchase price plus inflation, instead of the full value, such gifts will decline 30%.

O'Connell, the Independent Sector president, said he is "absolutely certain that Clotfelter and the other economists who have studied the appreciated property issue have grossly underestimated the effect" of reducing tax benefits for appreciated property.

In 1979, IRS data show, million-dollar-plus earners gave an average of $150,000 worth of appreciated property to charity. This dropped to about $123,000 in 1980 and 1981 and then plummeted to $74,000 in 1982, the first year of the Reagan tax cuts.

Causes supported by small donations, including churches, will suffer less under the tax simplification plans, the researchers say.

Some Increased Giving

"The portion of total giving for the lower and middle classes is increasing," said Virginia Hodgkinson, Independent Sector vice president and head of the National Center for Charitable Statistics. "Even though the percentage of Americans earning less than $50,000 declined slightly--from 87% in 1982 to 86% in 1983--their share of all giving is going up."

She said Americans earning under $50,000 gave 11% more in 1983 than the year before while those earning above that amount gave 6.7% more.